Quarter-point cut but Bank keeps its reasons secret

The Bank of England today cut interest rates for the sixth time in seven months - but left the City guessing about its motive.

Members of the nine-strong monetary policy committee broke with recent tradition by not putting out a statement as to why it cut the rate a quarter-point to 5.25%.

City pundits said the lack of explanation could indicate a close vote among the MPC, suggesting this may be the last cut for some time. That theory trig-gered a rush into sterling, which leaped one-and-a-third cents to $1.609 while the euro fell a third of a penny to 67.4p.

Economist Jeremy Hawkins at Bank of America said: "The fact there was no accompanying statement could mean there was more of a split than we have seen previously. That suggests that the next cut won't come as early as many people had gathered."

The stock market slipped from its all-time high, with the FT-SE 100 index down 15.2 to 6458.

Economist John O'Sullivan, of Greenwich NatWest, who predicted the decision correctly, said three factors had forced the Bank to act: the strong pound, slowing earnings growth and the downward revision to output growth in the fourth quarter of 1998.

However, O'Sullivan believes today's cut could be the last for a while.

He said: "It's difficult to see what would prompt the Bank to cut further - it has factored in quite a bit of bad news already. And for next year, there's a growing feeling that rates will go up rather than down, particularly if there's a strong recovery in the second half of this year as expected."

Business leaders welcomed the cut, which means the Bank's base rate has fallen from 7.5% at the start of October. At the London Chamber of Commerce and Industry, spokesman Andrew Hawkins said: "Busi-ness will welcome this cut.

"However, it is relatively small and it will do little to help the worsening balance of payments gap. Given that there is little evidence of inflation in the economy, it is a pity that the MPC did not take the bolder step of cutting the rate to 5%."

The European Central Bank sets its interest rate tonight, with pundits predicting a close call between rates staying at 3% or falling by a quarter-point. Earlier, there were mixed German data showing a surprise fall in the jobless total, coupled with a worse-than-expected slump in manufacturing orders.